Oil Rally Hits Speed Bump: Peace Deal Fears vs Supply Cuts

Crude prices are caught in a tug-of-war today. January WTI up 0.45% and gasoline up 0.01% as stock market strength sparked energy demand optimism. But here’s the twist—gains are getting capped by Trump’s Ukraine peace plan chatter.

The supply wild card: If Ukraine war ends, sanctions on Russian oil could lift, flooding markets with more crude. Vortexa data shows crude sitting on idle tankers hit 114.31M barrels (highest in 2.25 years), signaling storage buildup concerns.

Production reality check: OPEC flipped its Q3 outlook from -400k bpd deficit to +500k bpd surplus. US crude output is running hotter than expected—EIA bumped 2025 forecast to 13.59M bpd. Meanwhile, Russia’s export game got squeezed: shipments dropped to 1.7M bpd (3-year low) after Ukraine torched 13-20% of refining capacity.

Supply glut incoming? IEA warned of a record 4M bpd surplus coming in 2026. OPEC+ already hit pause on production hikes starting Q1 2026. US crude inventories are running 5% below seasonal average—tight for now, but with more barrels potentially flooding in, the picture could flip fast.

The real story: Geopolitical support (Russia sanctions, Venezuela military buzz) is losing steam against structural oversupply fears. Oil’s caught between “demand is hot” and “we’re about to drown in crude.”